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Edited version of private ruling
Authorisation Number: 1011746546675
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Ruling
Subject: Foreign Income - Foreign Resident
Question 1:
Are you an Australian resident for income tax purposes?
Answer
No.
Question 2:
Is the employment income you derived from working in Country A assessable income in Australia?
Answer
No.
This ruling applies for the following period:
Year ended 2008-09
The scheme commenced on:
1 July 2007.
Relevant facts
You are an Australian citizen and Country B is your country of origin.
Some time late in the income year, you departed Australia to work in Country A. You went there on a specific visa.
You are unsure of when you will return to Australia. You basically travel to any country your employer sends you to.
Since leaving for Australia some time in the income year, you have visited Australia a couple of times just to visit friends.
You are currently living in a private rented apartment in Country C.
The only investments you have overseas are a bank account in Country C and a Retirement fund in Country D.
In Australia, you lived in a purchased house which still has a mortgage. This has been rented out since you left for overseas. You have no intention of residing there in future. Along with this, you own another investment property.
You have a bank account in Australia.
Your work contract is open-ended as you are permanently employed.
You are single with no dependants. You didn't have any family accompany you overseas.
You have no sporting or social club connections with Australia.
In Country A, you participate in pilates and kick-ball.
You are not, or were not a Commonwealth Government of Australia employee.
You pay tax in Country A on the employment income you derive from working there.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 995-1(1)
Income Tax Assessment Act 1997 Subsection 6-5(3)
Income Tax Assessment Act 1997 Subsection 6-10(5)
Income Tax Assessment Act 1936 Subsection 6(1)
Reasons for decision
An Australian resident is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).
The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:
· the resides test.
· the domicile test.
· the 183 day test.
· the superannuation test.
The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia if they meet the conditions of one of the other three tests.
The resides test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; have one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.
For the period that you were physically present in Country A from some time in the 2007-08 income year, you are not considered to be residing in Australia according to ordinary concepts under this test.
The domicile test
Generally, if a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.
Domicile
In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.
The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.
A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life.
In your case, from some time in the 2007-08 income year when you relocated to Country A, you still maintained an association with Australia through a couple of investment properties and a bank account. However, your association with Country A was more significant as:
You have been residing and working there since some time in the income year.
You participate in a couple of specific social activities.
Based on these facts, it is therefore considered that you have established and maintained a permanent place of abode in Country A.
The 183-day test
This test does not apply to you as it has been identified that your permanent place of abode will be in Country A.
The superannuation test
An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.
In your case, you were not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.
Your residency status
As you are not deemed to be an Australian resident for income tax purposes under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident since you left Australia some time in the 2007-08 income year.
Foreign employment income derived whilst you are a foreign resident
Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a foreign resident directly or indirectly from Australian sources, as well as ordinary income included by a provision on a basis other than having an Australian source is assessable.
Statutory income from all Australian sources is also included in a foreign resident's assessable income under subsection 6-10(5) of the ITAA 1997.
The source of income derived from employment is generally the place where the duties or services are performed (Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76).
In your case, you are a foreign resident who derived employment income from Country A in the 2008-09 income year. Therefore, it will not be assessable income in Australia under subsection 6-5(3) of the ITAA 1997.